Union Budget 2021: Auto sector expects relief in custom duties; EV units seek tax holiday

The auto industry expects relief from the Union Budget 2021 in multiple areas including direct and indirect taxation

FP Staff January 31, 2021 20:18:01 IST
Union Budget 2021:  Auto sector expects relief in custom duties; EV units seek tax holiday

Hyundai car factory. Image courtesy Wikimedia Commons

The auto industry expects relief from the Union Budget 2021-22 in multiple areas including direct and indirect taxation, GST, in addition to various policy-level initiatives. The automobile industry hopes for a roadmap for a recently announced production-linked incentive scheme and policy on scrapping of commercial vehicles, a Reuters report said.

A few auto sector firms shared their pre-Budget expectations with Firstpost:

Harsha Kadam, CEO, Schaeffler India; President, Industrial Business

Among the many sectors that were impacted by the pandemic, the auto industry was amongst the worst-hit. Budget 2021 is an opportunity to bring in measures that can help boost sustainable growth for the industry. The auto components industry will also see more investments if further clarity is provided on the PLI Scheme announced in 2020. Implementation of the scrappage policy will also improve sales that will benefit the industry and environment.

From an overall manufacturing industry perspective, stabilization of raw material prices is of importance to the industry, promoting finished good exports will in turn increase FOREX reserve. The industry also requires some relief in custom duties especially for raw materials and other manufacturing elements.

Anand Ayyadurai, Co-founder and CEO, VOGO

We believe the outlook of the mobility sector will be majorly driven by electric vehicles as the world is moving towards greener and cleaner transit solutions. In order to drive this movement, we are hoping to see a reduction in GST on EV batteries from 18 percent to 5 percent and along with these subsidies on all electric vehicles including low-speed electric two-wheelers. This will not only support the manufacturers and service providers but will also reduce the overall cost of the vehicle for consumers.

Jatin Ahuja, Founder and MD, Big Boy Toyz

While the rest of the automobile sector was financially and economically impacted due to the coronavirus pandemic, the pre-owned luxury car market grew at an unusual pace. Going forward, we expect to have continuous government support to sustain the recovery that we have made. Increasing the spending capacity of consumers will help us to regain the lost momentum. Also, initiatives to promote the phygital experience (physical + digital) will be appreciated as this is the new normal now. Lower taxes, simplified and GST filing must be the motto of this year’s Budget. Companies, OEMs, and individuals are expecting the Budget to be long-term friendly rather than focusing on just survival.

Yogesh Bhatia, Founder, Detel

With the promotion of clean energy priority on the government agenda, we have strong expectations from the Union Budget when it comes to the Electric Vehicles (EV) industry. We expect the central government to provide an Income Tax holiday for EV unit operations. This will lead to a competitive price on EVs.  The government should also consider lowering ROI on the electric vehicle fraternity. In order to encourage people towards faster adoption of EVs, we expect the government to allot budgets for providing subsidies on low-speed EVs. Another key step that the government can take is to waive off the parking fee and toll rates for EVs that will further push green mobility in India.

Jeetender Sharma, Founder and MD, Okinawa Autotech

The year 2021 can prove to be a revolutionary year for the electric vehicle (EV) industry. We are optimistic that the government will continue to take the right steps to place India on the global EV map. We urge the finance minister to reconsider the current taxation framework applicable to raw materials and the final product in case of EVs. While the GST input on raw material is 18 percent, the tax on outward supplies currently stands at 5 percent, leading to an implicit inverted duty structure for us (manufacturers).

Rushi Shenghani, CEO and Founder, Earth Energy EV

We expect the government's Atmanirbhar Bharat Abhiyan to get more incentives as it aims to inspire companies and see India's green mobility growing. To further support the localisation of battery production which accounts for around 40 percent of the EV development cost, the government can reduce the GST on batteries as well as import duty slabs. It presently incorporates the GST of 18 percent on lithium-ion batteries and 28 percent on lead-acid batteries. The cost of an EV can come down significantly with the GST reduction. The government should finalise its incentives-based scrappage policy which can help create demand in the commercial vehicles (CV) segment as well. We request the government to be liberal with infrastructure spending and make charging stations mandatory in all official and residential areas which will contribute to increasing penetration of EV across the country.

Sandeep Aggarwal, Founder and CEO, Droom

The aftermath of the COVID- 19 has not only accelerated the need of owning a vehicle but inclined towards online buying for an automobile to avoid physical contact. We hope Budget 2021 continues to invest heavily in road infrastructure. The government should aim to announce things in this budget that can simplify the automobile industry including direct and indirect taxation. The government should make rules so that the inter-state transfer of vehicles has a very low entry barrier. The time is now ripe for the government to take initiatives to digitize the auto sector.

Banwari Lal Sharma, CEO, CarWale and BikeWale

GST rates should be lowered to 18 percent to boost demand across all segments of PVs and CVs in India and to assuage the burden of taxation on first-time buyers. Focus on augmenting the financing framework for implementing 'soft approvals' on loans for car buyers on par with consumer durable loans will go a long way in boosting demand. Also, the introduction of vehicle scrappage policy is the need of the hour. Although this may take some time to culminate, in the interim, the government can announce incentives for self-scrapping of End of Life vehicles that are in contradiction with the emission requirements. Recycling parts of these scrapped vehicles will also allow domestic manufacturers to cater to the widening demand-supply gap.

Updated Date:

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